Sunday, May 4, 2008

At least Todd Davis' phone number isn't 867-5309

I've followed the LifeLock story for a while, including CEO Todd Davis' act of widely publicizing his social security number, followed by the report of someone actually trying to fraudulently use his social security number, followed by the commercial in which Davis bragged that LifeLock foiled the person's attempts to fradulently use his social security number. That commercial, by the way, had the fakest dialogue that I have ever seen. It was about as bad as this:

Hello, I am a telephone operator for a major credit provider.


We have received an application for credit using your social security number.


OK. This is obviously a fraudulent transaction. We will deny the credit request.


OK, the commercial wasn't that bad, but it was close.

But in all of this monitoring, I seem to have missed on Davis and LifeLock:

Of course, what [Davis] leaves out is...the stuff about how the company's founder was being investigated for fraud (and potential identity fraud) at a previous company.

So, it should come as little surprise that some customers of Lifelock aren't particularly pleased with the company and have filed a class action lawsuit against the company, claiming deceptive advertising, and noting that it doesn't really provide much security.

Techdirt links to a Consumerist summary. More detail is found at a website from David Paris at Marks & Klein, LLP at the site Here is the press release:

Forget it. Paris' press release is uncopyable. Nice move, David. But I did find this article:

A husband and wife who say they were duped by LifeLock Inc., a company that touts its identity-theft protection through nationwide advertising, has sued the firm in a New Jersey court, seeking class-action status. If their suit and others in various states are successful, LifeLock Inc. could be on the hook for tens of millions of dollars in damages.

The lawsuit, which alleges violation of New Jersey’s Consumer Fraud Act, seeks to represent at least 21,000 New Jersey residents who paid $10 a month to subscribe to LifeLock. The action was filed March 28 on behalf of Warren and Susan Pasternak in New Brunswick’s Superior Court. The couple lives in East Brunswick.

So what was the violation?

“If anything happens, for any reason, while you’re a client of LifeLock, we will cover all losses and all expenses up to $1 million,” says LifeLock CEO Todd Davis in print, television and other ads in which he displays his own Social Security number to demonstrate his confidence in the company’s protection.

Note the use of the word "all" twice, but also note the use of the words "up to."

So what happened to the Pasternaks?

According to the lawsuit, the couple believed that LifeLock would make it “virtually impossible” for someone to steal their identities.

“But sometime later, they heard about a lawsuit filed in Los Angeles by Experian Information Solutions Inc. [credit bureau] that claims LifeLock violates the Fair Credit Reporting Act and illustrates how the company engages in fraudulent advertising,” says David S. Paris, an attorney with the Red Bank firm Marks & Klein LLP who represents the couple.

OK, so what happened to the Pasternaks? They heard about another lawsuit. It doesn't sound like their identities were stolen, or that they suffered any harm.

Mike Prusinski of LifeLock claims the system is effective:

“The LifeLock system of proactive identity-theft protection is an approach that works,” says Prusinski. “Only 71 out of our 900,000 members have ever needed to utilize our guarantee, and all 71 had their good names completely restored — proving that LifeLock’s industry-leading proactive approach is truly effective.”

But apparently the problem lies in the fine print:

Creditors are not required to contact applicants even if they have fraud alerts in their files, says the Pasternak lawsuit. The Experian lawsuit makes a similar argument. The Pasternaks also blast LifeLock’s $1 million guarantee, claiming that the fine print renders it virtually worthless.

Can a LifeLock purchaser reasonably find out about this fine print? While I could not find a complete copy of the the LifeLock terms on the LifeLock website, I did find this text:

Our Service Guarantee (Warranty) is in support of our Service under the Terms and Conditions Agreement and is provided without additional charge:

A. If you are our member when someone accesses your personal identifying information and subsequently uses it without your authorization to commit a fraud, due to a failure or defect in our Service, and you have complied with this Agreement, subject to the terms herein, we will pay professionals to assist in restoring any such loss or recover such expenses, as required, provided however that the maximum limit of our Service Guarantee is $1 (one) million per lifetime for all incidents in the aggregate.

B. You must be truthful with us and you must tell us of the use of your personal identifying information without your authorization to commit a fraud within 30 days of first learning of it. You agree to cooperate with those we hire to help you.

C. If you need professional assistance to help remediate damages caused by the failure or defect in our Service, we will arrange for, and cover the expense of, that assistance to be provided to you through persons or firms we select; we will not reimburse fees of professionals or other service providers unless we choose those providers for your particular matter. Any such professionals, if required or applicable, will be licensed in the jurisdiction where your particular matter resides.

D. We will cure any failure or defect in our Service, resulting in damages you incur, subject to the terms of this Agreement as follows:

(i) If the amount involved is over $1,000, we reserve the right to investigate the Service Guarantee request in order to determine whether the request is valid before we do anything else. We will perform our investigation as promptly as we can. If our investigation shows that a reasonable person would conclude that your personal identifying information was used without your authorization to commit a fraud while you were a member and you have complied with all this Agreement, we will perform as described herein.

E. If we find that you intentionally misrepresented damages or committed a fraud related crime and misrepresented that you were a member when your information was misused, you agree to pay us back upon demand any amount we have paid in connection with your claim, including any costs we incur to collect the money from you. Being found guilty of a crime related to the loss which you attributed to identity theft is sufficient evidence to conclude that we are entitled to recover all amounts paid on your behalf as described above, but it is not the only basis upon which we may so conclude.

F. Similarly, should we decline your Service Guarantee request following our investigation and that decision subsequently is determined to have been wrong, we will honor our Service Guarantee.

I was able to access this information from the main website, by clicking on the button "$1 Million Service Guarantee."

So who is David Paris?

David earned his J.D. from the Benjamin Cardozo School of Law, where he was a member of the "Journal of Gender and the Law", and graduated with a concentration in tax law. David also served as a judicial intern for the Honorable Alfred J. Lechner, U.S.D.J.

Prior to attending law school, David graduated from the University of Maryland with a B.S. in Finance.

In 2008, David was honored as a Franchise Times Legal Eagle for being considered by his peers and clients to be one of the top franchise attorneys in North America.

David's practice focuses on Franchise litigation, franchising successful business concepts, advising prospective franchisees and the representation of small businesses. David also has extensive experience handeling [SIC] matters involving consumer fraud. Prior to Joining the firm, David was an Associate in the Litigation department of the New York City office of Gibbons P. C.

David has successfully litigated, arbitrated and settled matters on behalf of Franchisees and small business owners nationwide as well as Fortune 1000 Corporations.

David is currently admitted to practice law in New York and New Jersey on the State and Federal levels, as well as the Northern District of Illinois and the District of Colorado. David is a member of the American Bar Association (Franchise section, Litigation section), the New York Bar Association, and the New Jersey Bar Association.

As to this extensive experience "handeling" consumer fraud, I couldn't find any evidence of it on the web. But I did find this quote in answer to the question "when should you settle a case?"

"Clearly, there is no definitive answer to this question. Rather, the determination to settle a case should be made after enough discovery has been exchanged to allow for an informed decision to be reached. That decision should be based on the consideration of a number of factors, including: the goals of the client (whether or not he or she is seeking monetary damages or to enact some type of systemic change), the strengths and weaknesses of the parties' respective cases, the client's ability to incur the economic and emotional costs
associated with protracted litigation, the tenacity of the adversary, and the unpredictability of a jury. Based on my experience, the litmus test is that if all of the parties are equally unhappy with the terms of the settlement, a successful resolution has been reached."

So is Paris hoping to extract a class action settlement before going to trial? We'll see.

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